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Plains to Acquire BP Assets - Analyst Blog

With a view to expanding its operations in Canada,
Plains All American Pipeline, L.P.
's (
PAA
) unit Plains Midstream Canada ULC has entered into a definitive
agreement to acquire
BP plc.
's (
BP
) Canadian natural gas liquids ("NGL") as well as its liquefied
petroleum gas ("LPG") business. The acquisition is anticipated to
close late in the first quarter or early in the second quarter of
2012, subject to regulatory approval.

Plains All American Pipeline actively relies on acquisitions to
achieve growth. Since the beginning of the final quarter of 2011,
the partnership has completed two acquisitions and entered into
definitive agreements for two additional buyouts, the total
consideration of the same being $620 million.

The current agreement with BP is valued at a substantial $1.67
billion. This acquisition will boost the partnership's midstream
business through additions of pipelines, storage capacity,
fractionation plants and supply contracts. The strategic location
of the assets would allow the partnership to process gas from U.S.
formations including Bakken in North Dakota and the Marcellus Shale
in Pennsylvania, effectively catering to the rising demand of the
North American markets.

The third quarter performance of the partnership exceeded our
expectation. Significantly, the earnings beat was achieved on the
heels of suitable and accretive acquisitions, namely the acquired
Southern Pines asset boosting the Facilities segment and Supply and
Logistics gaining from the acquisition of Nexen's crude oil
business.

The market also reacted to the acquisition news positively.
Friday's closing price of $66.71 reflected a 1.1% rise from the
previous day's close.

Plains All Pipeline continues to generate strong cash flows,
with net cash flow from operations totaling $780 million in the
third quarter. Besides its existing credit facilities and new bank
commitment for $1.0-$1.2 billion, the $300 million of proceeds
retained from an equity offering in November positions the
partnership well to complete the transaction.

Plains All American Pipeline currently retains a Zacks #3 Rank,
which translates into a short-term Hold rating.

Houston, Texas based Plains All American Pipeline owns assets
strategically located in well-established oil producing regions,
catering to major U.S. refinery and distribution markets. Other
than organic growth opportunities, the partnership also relies on
acquisitions to spur growth.

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